Overseas Chinese Banking Corporation (OCBC Bank)

[Temperament]

Ocbc if $10.00 or less worth buying to hold for long term? I kinda like ocbc over the other two however i dont know if the stock is fairly priced or expensive now?

IMO. it's not cheap or too expensive. But i have sold my 2256 units @$10.4 in Feb. & Apr. this year. i can wait.

[felixleong]

http://www.todayonline.com/business/ocbc...nk-sources

SINGAPORE — Oversea-Chinese Banking Corp (OCBC) has made a binding bid for Hong Kong’s family-run Wing Hang Bank worth about S$6.7 billion, two people with knowledge of the matter said yesterday, in what could become the Singapore lender’s biggest acquisition.

OCBC conducted due diligence and offered about but less than the two times book value Wing Hang was seeking, said the sources, who asked not to be identified as the information was private. The companies are in exclusive talks to bridge the valuation gap, the sources said.

Binding bids were due in the middle of last month and it remains unclear if the two parties are likely to seal a deal. OCBC declined to comment yesterday, while Ms Connie Leung, a Hong Kong-based spokeswoman for Wing Hang, also declined to comment.

The Hong Kong bank has a market value of US$4.6 billion (S$5.8 billion), which is 1.7 times its estimated 2013 book value, data compiled by Bloomberg show.

OCBC, which gets almost two-thirds of its revenue from Singapore, is stepping up overseas expansion plans as it seeks to offset the lowest lending margins in South-east Asia.

Banks in Singapore have an average net interest margin of 1.77 per cent, according to data compiled by Bloomberg. While that is higher than Hong Kong’s 1.73 per cent, the Chinese city is seen by lenders as a gateway to the mainland and a way to benefit from increasing global use of the yuan.

Led by Chief Executive Samuel Tsien, who was raised in Hong Kong, OCBC has been expanding in Greater China, Malaysia and Indonesia. The Singaporean bank would need fresh capital to acquire Wing Hang and would likely seek full ownership, Citigroup analyst Robert Kong said.

The family of Wing Hang Chairman Patrick Fung, its affiliates and Bank of New York Mellon together hold about 45 per cent of shares in the Hong Kong lender.

Hong Kong’s family-run banks, squeezed for years by larger competitors including HSBC Holdings and Bank of China, have been attracting interest in recent months from acquirers as the city’s role in cross-border financing expands.

China’s Yue Xiu Group agreed in November to buy a majority stake in Chong Hing Bank for US$1.5 billion, the first acquisition of a Hong Kong lender since 2009.

Wing Hang would give a buyer a network of 70 branches spanning Hong Kong, Macau and mainland China. Its presence across southern China’s Pearl River Delta makes it a more attractive target than other smaller family-owned banks in the city, said Ms Grace Wu, an analyst at Daiwa Capital Markets Hong Kong.

[felixleong]

At 2 times book value and over 20 times earnings, Wing Hang Bank seems overvalued?

I think OCBC is likely to have the winning bid.

I also feel that OCBC will likely need to do a rights issue to pay for Wing Hang Bank.

maybe something like 3 rights per 10 share at $9.00, something like that to raise the 6.7 billion.

any views?

[AlphaQuant]

At 2 times book value and over 20 times earnings, Wing Hang Bank seems overvalued?

I think OCBC is likely to have the winning bid.

I also feel that OCBC will likely need to do a rights issue to pay for Wing Hang Bank.

maybe something like 3 rights per 10 share at $9.00, something like that to raise the 6.7 billion.

any views?

Personally fairly neutral on this - in general i am not a big fan of banking overseas acquisitions (tends to overpay) but that said getting more involved in RMB looks imperative given the internationalisation/convertibility(?) evolution.

Now it's clear why there wasn't a special bonus on the F&N divestment - the board probably had the WingHang acquisition in mind quite a while back.

I'll be pretty happy to apply for excess rights @ $9 though.

[felixleong]

Also UOB, ABC and ANZ have shown interest in Wing Hang but have yet shown their cards
they might bid above 2x book value but unlikely, the move by OCBC is considered a quick and strong play going straight for 2x book value when before market close the stock was only trading at 1.7x

[thefarside]

This will likely put paid to any further speculation, for the time being, about a possible OCBC-GE merger.

However this makes it more likely that GE will declare a special dividend, as the parent now needs the cash for the acquisition and any contribution will help reduce he additional capital required.

[Temperament]

Will the rights be renounceable? Whoever the Issuer might be? Shall we tikam if renounceable? i think we can only tikam if the Market is not in favour of the rights offering. There is no free lunch, really.

[felixleong]

Yeah, thanks for pointing that out.
If OCBC's bid is successful, they would really need a lot of cash.
Any dividends from their subsidiaries like GE or UE will be very helpful to the parent.

after doing some research I realize that relatively the 2x that OCBC is paying is not that expensive
as Yue Xiu Group paid 2.35x for Chong Hing Bank
http://www.bloomberg.com/news/2013-10-27...n-bid.html

However from a value investor point of view, 2x could be expensive given that our local banks are trading at around 1.3x only.

[pianist]

the news said it is a binding bid. anyone cares to explain what is a 'binding' bid?

[Stocker]

OCBC will not get this bank if they stick to 2x BV, because more banks in HK sold for much higher valuations than 2x due to China potential.